Bernanke says recovery is around the corner

The recession is nearing bottom and gradual improvement should begin by the end of the year, the Fed chairman tells lawmakers.

"In particular, businesses are likely to be cautious about hiring, implying that the unemployment rate could remain high for a time, even after economic growth resumes," Bernanke said.

He said unemployment would probably peak early next year at less than 10% and then come down slowly after that.

The nation's economic activity has decreased sharply in each of the last two quarters. But Bernanke said there was "a bit of good news" in the data from the first three months of this year, noting that about half of the annualized 6.1% decline in gross domestic product came from businesses accelerating the liquidation of their inventories.

"As inventories are worked down, then firms will be able to increase their production to meet what looks to be some stabilization in final demand," he said.

Although businesses will be slow in hiring workers to rebuild their inventories, that slower growth should continue to keep inflation low, Bernanke said.

"It's very hard for serious inflation to take off when you have this kind of slack in the economy," he said.